Prime Minister's panel wants mandatory R&D funding by companies

The council has further asked that line ministries be mandated to allocate at least 2% of their budgets as research and innovation grants for developing and deploying technologies related to priority concerns.Anubhuti Vishnoi | ET Bureau | October 20, 2018, 08:16 IST

New Delhi: The Prime Minister’s Science Technology and Innovation Advisory Council (PM-STIAC) wants to make it mandatory for medium and large enterprises in key sectors to set aside funds for research and development after the Economic Survey pointed out the abysmal levels of investment in this area. It had said that R&D investment in India has been stagnant for 20 years at 0.6-0.7% of gross domestic product with that by the private sector at 0.35%.

The high-level panel wants the private sector to step up in this regard and take that share to at least 1% of GDP by 2022. The global average is 1.5% of GDP, which is the overall level that the council wants to see in India over the next five years.

The council has further asked that line ministries be mandated to allocate at least 2% of their budgets as research and innovation grants for developing and deploying technologies related to priority concerns.

The council discussed the issue in detail at its first meeting on October 9 at which it also deliberated over a mandatory investment model proposed by the Confederation of Indian Industry (CII). The lobby group had suggested that the pharmaceuticals and biotechnology industries should be mandated to set aside 8% of turnover for R&D, citing a global average of 15%.

For automobiles, it advocated 3% of turnover, 2% for technology hardware and equipment, 5% for software and computer services, 2% for electronic and electrical equipment, 1% each for industrial engineering, chemicals and general industrials and 0.55% for oil and gas as well as construction.

Among the few companies that have exceeded the threshold in their respective sectors, according to CII data, are Dr Reddy’s Laboratories, Cadila Healthcare and Cipla, among others.

Loss-making companies may be exempted from mandatory R&D investments. During economic downturns, the panel suggested a threeyear average to calculate the minimum R&D investment for a particular year. The council also said that R&D investment should be calculated at the level of each industry rather than at group level with each sector disclosing this through audits and selfdeclarations.

The council proposed a 100% tax holiday for products emerging out of R&D for the first five years of commercialisation, provided they are patented or pending patent application, to incentivise industry.

The office of principal scientific adviser Vijay Raghavan has also weighed in against the finance ministry’s plans to withdraw weighted R&D tax deduction provisions from April 1, 2020, saying this could slow down indigenisation and retard new product generation.

The council observed that while R&D investment may not in itself be a metric for innovation, there is little scope for this in absence of funding.

An Advanced Mission Mode Innovation and Research (ADMIRE) is proposed to be launched by line ministries to provide direct R&D grants to industry on a 50-50 model through competitive bidding.

CENTRE-STATE PARTNERSHIP

Observing the low contribution of states to R&D, the PMSTIAC suggested they partner with the Centre to jointly fund research and innovation programmes through centrally sponsored schemes.

The panel has also pushed for an amendment in corporate social responsibility (CSR) rules to allow contributions to publicly funded universities and institutes, national laboratories and autonomous bodies. The principal scientific adviser’s office is learnt to have received unanimous support on the issue from various ministries. The panel has strongly advocated a twofold increase in the central allocation to scientific departments along with a nimbler grant dispensation process and flexibility in grant utilisation.